Correlation Between Iberdrola and Iberdrola

Can any of the company-specific risk be diversified away by investing in both Iberdrola and Iberdrola at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Iberdrola and Iberdrola into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Iberdrola SA and Iberdrola SA, you can compare the effects of market volatilities on Iberdrola and Iberdrola and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Iberdrola with a short position of Iberdrola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iberdrola and Iberdrola.

Diversification Opportunities for Iberdrola and Iberdrola

0.96

Correlation Coefficient

Iberdrola  Iberdrola

Almost no diversification

The 3 months correlation between Iberdrola and Iberdrola is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Iberdrola SA and Iberdrola SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iberdrola SA and Iberdrola is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Iberdrola SA are associated (or correlated) with Iberdrola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iberdrola SA has no effect on the direction of Iberdrola i.e., Iberdrola and Iberdrola go up and down completely randomly.

Pair Corralation between Iberdrola and Iberdrola

Assuming the 90 days horizon Iberdrola SA is expected to generate 1.27 times more return on investment than Iberdrola. However, Iberdrola is 1.27 times more volatile than Iberdrola SA. It trades about -0.07 of its potential returns per unit of risk. Iberdrola SA is currently generating about -0.09 per unit of risk. If you would invest  1,502  in Iberdrola SA on September 13, 2024 and sell it today you would lose (107.00) from holding Iberdrola SA or give up 7.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Iberdrola SA  vs.  Iberdrola SA

Iberdrola SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iberdrola SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Iberdrola SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iberdrola SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Iberdrola and Iberdrola

The main advantage of trading using opposite Iberdrola and Iberdrola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iberdrola position performs unexpectedly, Iberdrola can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Iberdrola will offset losses from the drop in Iberdrola's long position.

The idea behind Iberdrola SA and Iberdrola SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.